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Cambridge Bancorp Announces Record Earnings for Full Year 2013

Tuesday, January 28, 2014

CAMBRIDGE, Mass. - Cambridge Bancorp (OTCBB: CATC) today announced unaudited net income of $14,140,000 for the year ended December 31, 2013, representing an increase of $737,000, or 5.5%, compared to net income of $13,403,000 for the year ended December 31, 2012. Diluted earnings per share (EPS) were $3.62, a 4.9% increase over diluted earnings per share for the prior year.

"We are pleased to report the Bank delivered another record financial performance for the year of 2013," noted Joseph V. Roller II, president and CEO. "The Bank continued to grow across all business lines with robust contributions from wealth management and loan growth."

The Bank experienced a historic year for loan growth with an overall increase of $200.2 million, or 27.0%, for the year. Both residential and commercial mortgages showed exceptional growth for the year, with increases of $110.3 million (31.7%) and $86.9 million (31.4%), respectively. Home equity loans were down by $3.9 million for the year ending December 31, 2013 as many consumers continued to refinance second mortgages into first mortgages due to favorable interest rates.

Deposit growth achieved similar success with an overall increase of $127.7 million, or 10.0%, as consumers and businesses continued to place their liquid funds with sound financial institutions.

For the year ended December 31, 2013, net interest income decreased slightly by $408,000, or 0.9%, to $45.5 million compared to $45.9 million for 2012. The prolonged low interest rate environment intensified margin pressures, which have been unfavorable for the industry for some time. The Bank's net interest margin decreased 23 basis points to 3.35% for the year compared to 3.58% for the year ended December 31, 2012.

The Bank's record loan growth outpaced deposit growth for the year. The Bank elected to strategically deploy cash flows emanating from the investment portfolio to meet the shortfall between loan funding needs and deposit growth. The Bank's total investment securities portfolio decreased to $448.0 million from $573.5 million at year-end 2012. The shift in the Bank's earning asset mix coupled with the lower interest rate environment resulted in a decrease of $3.1 million in interest income on investment securities for the year. This decrease was partially offset by $1.7 million in higher interest on loans and a slight reduction in deposit costs. The higher relative yields attributed to loans over investment securities will benefit the Bank's net interest income over time.

The Bank sustained a high level of total noninterest income for the year with several categories experiencing solid growth. Noninterest income totaled $23.2 million for the year 2013 compared to $20.5 million for 2012. The Bank's Wealth Management income accounted for $2.2 million, or 80%, of the upswing in total noninterest income for the year. Since the beginning of 2013, Wealth Management assets under management (AUM) have increased $345 million to $2.1 billion at year-end.

Other contributors to the noninterest income increase were higher gains on disposition of investment securities of $239,000, higher ATM/Debit card income of $139,000, and higher deposit account fees of $169,000 compared to the prior year. In the second half of 2013, the Bank experienced a dramatic slowdown in revenue produced by gains on loans sold as mortgage refinancing activity declined due to rising interest rates. Income from gains on loans sold ended $73,000 lower than last year. Lastly, there was a decrease of $61,000 in bank owned life insurance income compared to the year ended December 31, 2012.

Noninterest expense increased slightly by $264,000, or 0.6%, to $46.1 million for the year ended December 31, 2013. The decrease in salaries and benefits for the year of $840,000 is primarily the result of lower expenses related to our retirement plans. The increase of $503,000 in occupancy and equipment for the year is primarily the result of the relocation of our Wealth Management group to new space in Boston during the summer of 2013, along with a full-year of expense for the Bank's new South End branch, which opened in November of 2012. The increase of $452,000 in data processing expense is attributable to increased volumes and new products.

Total loans outstanding at year-end 2013 were $942.5 million compared to $742.2 million at year-end 2012. Loan quality remained sound across consumer and corporate customer bases with non-performing loans totaling $1.7 million at December 31, 2013, a modest increase of $133,000 compared to the year-end 2012. The Allowance for Loan Losses was $12.7 million, or 1.35%, of total loans outstanding at year-end 2013. At December 31, 2012, the Allowance for Loan Losses was $10.9 million, or 1.47%, of total loans outstanding. The provision for loan losses of $1.5 million during 2013 was $700,000 more than the prior year's provision. This increase was primarily in response to substantial loan growth during the year.

In the fourth quarter of 2013 unaudited net income was $3,639,000, compared to $3,003,000 for the same quarter in 2012.

"Results for the fourth quarter were highlighted by a very favorable increase in noninterest income," said Mr. Roller. "New business and favorable equity markets accounted for the strong contribution from Wealth Management income, which increased by $748,000 (21.1%) for the fourth quarter of 2013 as compared to the fourth quarter of 2012. The provision for loan losses of $500,000 during fourth quarter of 2013 was $400,000 more than the prior year's provision. This increase was primarily in response to the aforementioned substantial loan growth. The Bank's net interest margin decreased 14 basis points to 3.41% for the fourth quarter compared to 3.55% for the quarter ended December 31, 2012. We are encouraged by the prospects of an improving economy. We are confident in our ability to capitalize on opportunities in the markets and businesses in which we compete."

Total deposits at year-end 2013 were $1.4 billion compared to $1.3 billion at year-end 2012.

Total assets at year-end 2013 were $1.5 billion versus $1.4 billion year-end 2012.

About Cambridge Bancorp

Cambridge Bancorp and its subsidiary, Cambridge Trust Company, are based in Cambridge, Massachusetts, in the heart of Harvard Square. Cambridge Trust Company is a 124-year-old Massachusetts chartered commercial bank with $1.5 billion in total assets and 12 Massachusetts branch offices in Cambridge, Boston, Belmont, Concord, Lexington, Lincoln, and Weston. Cambridge Trust Company is one of New England’s leaders in wealth management with $2.1 billion in client assets under management. The Wealth Management group maintains offices in Boston, Massachusetts, and Concord and Portsmouth, New Hampshire.

The accompanying unaudited condensed interim consolidated financial information should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Cambridge Bancorp 2012 Annual Report, which is posted at www.cambridgetrust.com/annualreport. We will also post the Cambridge Bancorp 2013 Annual Report at the same site later this quarter.

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